UK advisor numbers may be an omen for industry in Canada

by WP15 Aug 2013

SHARE

UK advisor numbers may be an omen for industry in Canada

In spite of warnings that the number of advisors would plummet with regulatory reforms, the number of advisors in the UK has returned to its pre-reform level, the UK’s Financial Conduct Authority (FCA) said, as advisors have been returning after raising their professional qualifications.

“[The reform] wasn’t just embedded commissions and sales structures, it was also about raising proficiency," said Ken Kivenko chairman of Canada's Advisory Committee for the Small Investor Protection Association. "A lot of articles said people were leaving, but they really should leave because they never really were advisors.”

Canadian regulators are considering adopting similar regulatory changes – including banning certain commissions and requiring a best practice fiduciary standard for advisors. Opponents to such reforms have argued this would cause advisors to exit the industry and leave Canadians underserved.

In light of the UK numbers, Kivenko said that those concerns now seem overblown. "Any time you disrupt a system like the UK did it’s going to take two years [to see results], because it’s a shockwave, but once the shock is over they are going to be better off,” Kivenko told Wealth Professional.

The FCA said in July 2013 there were 32,690 retail investment advisors working in the UK, a number within the range predicted by independent researchers commissioned by the FCA’s predecessor, the Financial Services Authority. The last time the number of advisors was counted, in December 2012, the number of advisors was 31,132.

Our commission structure should stay the way it is. In comparing our fees to the US, Canadian fee structure is actually lower. The minimal number of investors in Canada that don't understand and don't like the current fee structure can invest on their own. Then they wouldn't have to pay investment fees to advisors.

The point is that by eliminating commissions as a compensation structure, consumers lose a choice. Just because the number of Advisors is rebounding does not translate into service for all consumers. Financial advice from a mutual fund registrant in at least one bank branch is available for accounts of over $100,000. Where do consumers with average accounts of about $70,000 get advice? How many can afford the fees needed to support a financial advisory practice?chair@advocis.ca